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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
---- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
COMMISSION FILE NUMBER: 1-5989
ANIXTER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1658138
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4711 GOLF ROAD
SKOKIE, ILLINOIS 60076
(847) 677-2600
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
At May 1, 2000, 36,389,725 shares of the registrant's Common Stock, $1.00
par value, were outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . *
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . *
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . *
Item 4. Submission of Matters to a Vote of Security Holders. . *
Item 5. Other Information. . . . . . . . . . . . . . . . . . . *
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10
---------------
* No reportable information under this item.
This report may contain various "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which
can be identified by the use of forward-looking terminology such as
"believes", "expects", "prospects", "estimated", "should", "may" or the
negative thereof or other variations thereon or comparable terminology
indicating the Company's expectations or beliefs concerning future
events. The Company cautions that such statements are qualified by
important factors that could cause actual results to differ materially
from those in the forward-looking statements, a number of which are
identified in this report. Other factors could also cause actual
results to differ materially form expected results included in these
statements. These factors include general economic conditions,
technology changes, changes in supplier or customer relationships,
exchange rate fluctuations and new or changed competitors. Other
factors could also cause actual results to differ materially from
expected results included in these statements.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
13 WEEKS ENDED
------------------
MARCH 31, APRIL 2,
2000 1999
------- -------
Net sales $ 745.1 $ 595.1
Cost of goods sold 571.8 445.8
------- -------
Gross profit 173.3 149.3
Operating expenses 133.8 125.4
Amortization of goodwill 2.0 1.9
------- -------
Operating income 37.5 22.0
Interest expense (9.6) (8.6)
Foreign exchange and other, net (0.2) (0.1)
------- -------
Income before income taxes 27.7 13.3
Income tax expense 11.6 5.6
------- -------
Income from continuing operations 16.1 7.7
Discontinued operations:
Loss from discontinued operations, net of tax -- (1.5)
Gain on disposal of discontinued operations, net
of tax -- 45.9
------- -------
Net income $ 16.1 $ 52.1
======= =======
Basic income per share:
Continuing operations 0.45 0.19
Discontinued operations -- 1.06
------- -------
Net income $ 0.45 $ 1.25
======= =======
Diluted income per share:
Continuing operations $ 0.44 $ 0.19
Discontinued operations -- 1.06
------- -------
Net income $ 0.44 $ 1.25
======= =======
See accompanying notes to the condensed consolidated financial statements.
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ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS) MARCH 31, DECEMBER 31,
ASSETS 2000 1999
-------- --------
(Unaudited)
Current assets:
Cash $ 20.8 $ 17.5
Accounts receivable (less allowances
of $13.9 and $10.3 in 2000 and 1999, respectively) 561.2 537.5
Inventories 618.8 536.4
Deferred income taxes 18.7 18.2
Other current assets 12.4 11.5
-------- --------
Total current assets 1,231.9 1,121.1
Property and equipment, at cost 160.5 158.6
Accumulated depreciation (110.0) (105.5)
-------- --------
Property and equipment, net 50.5 53.1
Goodwill (less accumulated amortization of
$80.4 and $78.4 in 2000 and 1999, respectively) 232.6 229.1
Other assets 32.0 31.4
-------- --------
$1,547.0 $1,434.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 352.5 $ 340.4
Accrued expenses 126.4 149.1
Income taxes payable 10.0 6.0
-------- --------
Total current liabilities 488.9 495.5
Other liabilities 16.4 14.8
Long-term debt 576.8 468.0
-------- --------
Total liabilities 1,082.1 978.3
Stockholders' equity:
Common stock 36.1 35.9
Accumulated other comprehensive income (42.3) (37.6)
Retained earnings 471.1 458.1
-------- --------
464.9 456.4
-------- --------
$1,547.0 $1,434.7
======== ========
See accompanying notes to the condensed consolidated financial statements.
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ANIXTER INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS) 13 WEEKS ENDED
-------------------
MARCH 31, APRIL 2,
2000 1999
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 16.1 $ 52.1
Adjustments to reconcile income from continuing operations
to net cash provided by continuing operating activities:
Income from discontinued operations -- (44.4)
Depreciation and amortization 6.7 6.6
Deferred income taxes (0.8) (0.9)
Changes in current assets and liabilities, net (112.5) 17.8
Other, net 0.9 1.2
------ ------
Net cash (used in) provided by continuing operating activities (89.6) 32.4
INVESTING ACTIVITIES
Capital expenditures (2.2) (6.6)
Acquisition of business (6.7) --
Other 0.2 0.3
------ ------
Net cash used in continuing investing activities (8.7) (6.3)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 299.6 247.7
Repayment of long-term borrowings (189.7) (366.9)
Proceeds from issuance of common stock 11.7 0.7
Purchases of common stock for treasury (15.4) (18.1)
Other, net 0.3 (0.9)
------ ------
Net cash provided by (used in) continuing financing activities 106.5 (137.5)
CASH (USED IN) PROVIDED BY DISCONTINUED OPERATIONS (4.9) 137.5
------ ------
Increase in cash 3.3 26.1
Cash at beginning of period 17.5 20.5
------ ------
Cash at end of period $ 20.8 $ 46.6
====== ======
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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ANIXTER INTERNATIONAL INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF CONSOLIDATION AND PRESENTATION
The accompanying condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements included in Anixter
International Inc.'s ("the Company") Annual Report on Form 10-K for the year
ended December 31, 1999. The condensed consolidated financial information
furnished herein reflects all adjustments (consisting of normal recurring
accruals) which are, in the opinion of management, necessary for a fair
presentation of the condensed consolidated financial statements for the periods
shown. The results of operations of any interim period are not necessarily
indicative of the results that may be expected for a full fiscal year. Certain
amounts for the prior year have been reclassified to conform to the 2000
presentation.
NOTE 2. INCOME PER SHARE
The following table sets forth the computation of basic and diluted income per
common share from continuing operations:
13 WEEKS ENDED
-----------------------
MARCH 31, APRIL 2,
2000 1999
---------- ----------
Numerator (in millions):
Income from continuing operations $ 16.1 $ 7.7
Denominator (in thousands):
Basic common shares outstanding 35,525 41,547
Effect of dilutive securities:
Stock options and warrants 1,023 219
---------- ----------
Diluted common shares outstanding 36,548 41,766
========== ==========
Income per share from continuing operations:
Basic $ .45 $ .19
Diluted $ .44 $ .19
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ANIXTER INTERNATIONAL INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. COMPREHENSIVE INCOME
During the first quarter of 2000 and 1999, total comprehensive income amounted
to $11.4 million and $49.6 million, respectively. The difference between net
income and comprehensive income is the change in cumulative translation
adjustments.
NOTE 4. DISCONTINUED OPERATIONS
In the fourth quarter of 1998, the Company decided to exit its Integration
segment and accordingly, the Integration segment is reflected as a discontinued
operation in these financial statements. The sale of the North American
Integration business was completed on April 2, 1999, following the sale of the
European Integration business in the fourth quarter of 1998. Total proceeds
received were $215.8 million. This resulted in a one-time after-tax gain of
$45.9 million, which is net of $11.0 million of costs associated primarily with
the closing of selected Latin American and Asian Integration locations and
severance costs associated with staff reductions necessitated by discontinuing
the Integration segment.
Integration net sales were $160.0 million for the 13 week period ended April 2,
1999. Interest expense has been allocated to discontinued operations based on
the percentage of total identifiable assets.
NOTE 5. ACQUISITION OF BUSINESS
In the first quarter of 2000, the Company acquired 100% of the stock of allNET
Technologies Pty Limited ("allNET") for $6.7 million. allNET is a structured
cabling distributor located in Australia. The effect of this acquisition on the
operating results of the Company was not significant.
NOTE 6. SUMMARIZED FINANCIAL INFORMATION OF ANIXTER INC.
The Company has an approximate 99% ownership interest in Anixter Inc. at March
31, 2000, which is included in the consolidated financial statements of the
Company. The following summarizes the financial information for Anixter Inc:
5
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ANIXTER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
MARCH 31, DECEMBER 31,
2000 1999
-------- --------
(UNAUDITED)
Assets:
Current assets $1,225.3 $1,117.9
Property, net 50.5 53.1
Goodwill, net 232.6 229.1
Other assets 32.0 31.2
-------- --------
$1,540.4 $1,431.3
======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 480.8 $ 486.4
Other liabilities 11.1 9.9
Long-term debt 576.8 468.0
Subordinated notes payable to parent 11.5 19.1
Stockholders' equity 460.2 447.9
-------- --------
$1,540.4 $1,431.3
======== ========
ANIXTER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
(UNAUDITED)
13 WEEKS ENDED
-------------------
MARCH 31, APRIL 2,
2000 1999
--------- --------
Net sales $745.1 $569.9
Operating income $ 38.7 $ 22.7
Income before income taxes $ 29.4 $ 14.3
Income from continuing operations $ 16.6 $ 8.3
Loss from discontinued operations, net of tax $ -- $ (1.5)
Gain on disposal of discontinued operations, net of tax $ -- $ 45.9
Net income $ 16.6 $ 52.7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion and analysis of the historical results of
operations and financial condition of Anixter International Inc. (the "Company")
and factors affecting the Company's financial resources. This discussion should
be read in conjunction with the consolidated financial statements, including the
notes thereto, set forth herein under "Financial Statements" and the Company's
Annual Report on Form 10-K for the year ended December 31, 1999. This discussion
contains forward-looking statements, which are qualified by reference to, and
should be read in conjunction with, the Company's discussion regarding
forward-looking statements as set forth in this report.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
Consolidated net cash used in continuing operating activities was $89.6 million
for the first quarter of 2000 compared to $32.4 million provided for the same
period in 1999. Cash used in operating activities increased due to the increase
in working capital required to support the growth in the business. Specifically,
inventory has increased $82.4 million from December 1999 in order to support
future growth and a significant CLEC contract. Consolidated net cash used in
investing activities was $8.7 million for the first quarter of 2000 versus $6.3
million for the same period in 1999. In the first quarter of 2000, the Company
purchased a small structured cabling company in Australia for $6.7 million.
Consolidated net cash provided by financing activities was $106.5 million for
the first quarter of 2000 in comparison to $137.5 million used in the
corresponding 1999 period. The change is primarily the result of an increase in
long-term borrowings of $109.9 million to fund the increase in working capital.
In 1999, long-term borrowings were reduced by $119.2 million. Treasury stock
purchases in the first quarter of 2000 were $15.4 million compared to $18.1
million in the corresponding 1999 period. The Company received $11.7 million in
2000 from the exercise of 678,000 stock options. Cash used for discontinued
operations was $4.9 million in the first quarter of 2000 compared to $137.5
million provided in the corresponding 1999 period. The first quarter of 1999
includes the cash received from the sale of the North American Integration
business.
Financings
At March 31, 2000, $97.4 million was available under the bank revolving lines of
credit at Anixter Inc., of which $16.1 million was available to pay the Company
for intercompany liabilities. In March 2000, Anixter Inc. secured an additional
$75 million uncommitted line of credit.
Consolidated interest expense was $9.6 million and $8.6 million for the first
quarter 2000 and 1999, respectively. The increase is due to higher interest
rates along with higher debt levels during the current quarter.
The Company has authorized the repurchase of up to 1.5 million shares in 2000,
with the volume and timing to depend on market conditions. As of March 31, 2000,
the Company has repurchased 768,776 shares at an average cost of $19.97.
Purchases were made in the open market or through other transactions and were
financed through available cash from the sale of the Integration businesses and
other non-core assets.
7
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Other Liquidity Considerations
Certain debt agreements entered into by the Company's subsidiaries contain
various restrictions including restrictions on payments to the Company. Such
restrictions have not had nor are expected to have an adverse impact on the
Company's ability to meet its cash obligations.
Capital Expenditures
Consolidated capital expenditures were $2.2 million and $6.6 million for the
first quarter of 2000 and 1999, respectively. The Company expects to spend a
total of approximately $25 million in capital expenditures in 2000.
RESULTS OF OPERATIONS
The Company competes with distributors and manufacturers who sell products
directly or through existing distribution channels to end users or other
resellers. The Company's relationship with the manufacturers for which it
distributes products could be affected by decisions made by these manufacturers
as the result of changes in management or ownerships as well as other factors.
In addition, the Company's future performance could be affected by economic
downturns and possible rapid changes in applicable technologies.
Quarter ended March 31, 2000: Income from continuing operations for the first
quarter of 2000 was $16.1 million compared with $7.7 million for the first
quarter of 1999.
The Company's net sales during the first quarter of 2000 increased 25.2% to
$745.1 million from $595.1 million in the same period in 1999. Net sales by
major geographic market are presented in the following table:
13 WEEKS ENDED
-------------------
MARCH 31, APRIL 2,
2000 1999
--------- --------
(IN MILLIONS)
North America $572.3 $422.9
Europe 132.8 139.5
Asia Pacific and Latin America 40.0 32.7
------ ------
$745.1 $595.1
====== ======
When compared to the corresponding period in 1999, North America sales for the
first quarter of 2000 grew 35.3% to $572.3 million. The improvement was a result
of strong growth in the core Enterprise Network Communications and Electrical
Wire and Cable product sets, along with continued rapid growth in the Service
Provider sector and a 52% increase in Integrated Supply. Improvement in
Enterprise Network Communications reflected a rebound from the soft year-end
1999 sales related to the Year 2000 compliance efforts, while improvement in
Electrical Wire and Cable reflected higher copper prices. The Service Provider
sector continued its rapid growth and is now at an annualized $250 million run
rate. Europe sales declined 4.8% due
8
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to soft industry-wide networking products sales. Excluding the effect of changes
in exchange rates, sales improved 2.7%. Asia Pacific and Latin American net
sales were up 22.3% from the first quarter of 1999, reflecting improvement in
their respective economies. Excluding the effect of changes in exchange rates,
sales increased 20.6%.
Operating income increased to $37.5 million in 2000 from $22.0 million in the
first quarter of 1999. Operating income by major geographic market is presented
in the following table.
13 WEEKS ENDED
--------------------
MARCH 31, APRIL 2,
2000 1999
-------- --------
(IN MILLIONS)
North America $32.7 $19.9
Europe 5.2 5.5
Asia Pacific and Latin America (0.4) (3.4)
----- -----
$37.5 $22.0
===== =====
North America operating income increased 63.7% in the quarter. Operating margins
improved to 5.7% in the first quarter 2000, from 4.7% in the same period in
1999. The improvement primarily relates to a reduction, as a percentage of
sales, in retained overhead costs associated with the North American Integration
business and the absence of costs associated with the Year 2000 compliance
efforts incurred in 1999. Europe operating income decreased 5.1%, reflecting the
decline in sales. Excluding the effect of changes in exchange rates, Europe
operating profit declined 1.6%. Asia Pacific and Latin America operating profit
improved 88% to a minimal loss of $400,000 in the first quarter of 2000 from the
comparable period in 1999. This resulted from the 22.3% improvement in sales and
a reduced cost structure following the corrections made over the last 2 years.
The consolidated tax provision on continuing operations increased to $11.6
million in 2000 from $5.6 million in the first quarter of 1999 due to higher
pre-tax earnings. The 2000 effective tax rate of 42% is based on pre-tax book
income adjusted primarily for amortization of nondeductible goodwill and losses
of foreign operations which are not currently deductible.
9
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial data schedule
(b) Reports on Form 8-K
None.
10
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ANIXTER INTERNATIONAL INC.
Date: May 5, 2000 By: /s/ Robert W. Grubbs
----------------------------
Robert W. Grubbs
President and Chief Executive Officer
Date: May 5, 2000 By: /s/ Dennis J. Letham
--------------------------
Dennis J. Letham
Senior Vice President - Finance
and Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE FINANCIAL
STATEMENTS INCLUDED AS PART OF ANIXTER INTERNATIONAL INC.'S FIRST QUARTER 10Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORTS.
</LEGEND>
<CIK> 0000052795
<NAME> ANIXTER INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,799
<SECURITIES> 0
<RECEIVABLES> 575,069
<ALLOWANCES> 13,914
<INVENTORY> 618,772
<CURRENT-ASSETS> 1,231,893
<PP&E> 160,500
<DEPRECIATION> 109,983
<TOTAL-ASSETS> 1,546,959
<CURRENT-LIABILITIES> 488,941
<BONDS> 576,811
0
0
<COMMON> 36,048
<OTHER-SE> 428,844
<TOTAL-LIABILITY-AND-EQUITY> 1,546,959
<SALES> 745,059
<TOTAL-REVENUES> 745,059
<CGS> 571,716
<TOTAL-COSTS> 707,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,624
<INCOME-PRETAX> 27,716
<INCOME-TAX> 11,641
<INCOME-CONTINUING> 16,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,075
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.44
</TABLE>
